Johnson & Johnson — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing is an annual report, not a standalone Q4 filing; quarterly figures below are unaudited. Following the August 2023 separation of Consumer Health (Kenvue), continuing operations comprise Innovative Medicine and MedTech. Prior periods were recast for discontinued operations.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Worldwide sales | $85.2 billion | $80.0 billion |
| Gross profit | $58.6 billion | $55.4 billion |
| Gross margin | 68.8% | 69.3% |
| Earnings from continuing operations | $13.3 billion | $16.4 billion |
| Continuing-operations diluted EPS | $5.20 | $6.14 |
| Net earnings, including discontinued operations | $35.2 billion | $17.9 billion |
| Operating cash flow | $22.8 billion | $21.2 billion |
| Capital expenditures | $4.5 billion | $4.0 billion |
| Cash, cash equivalents and marketable securities | $22.9 billion | $22.3 billion |
| Total debt | $29.3 billion | $39.6 billion |
| Net debt | $6.4 billion | $17.4 billion |
Continuing-operations earnings before tax were $15.1 billion, or 17.7% of sales, versus $19.4 billion, or 24.2%, in 2022. The 2023 effective tax rate was 11.5%, compared with 15.4%. The company paid $4.70 per share in dividends, up from $4.45; its January 2024 declared dividend was $1.19 per share.
Fourth-quarter results
Q4 2023 sales were $21.4 billion, compared with $19.9 billion in Q4 2022. Earnings before tax were $4.8 billion versus $3.8 billion; continuing-operations net earnings were $4.1 billion versus $3.2 billion. Total net earnings were $4.0 billion versus $3.5 billion, and total diluted EPS was $1.67 versus $1.33. Q4 segment sales were $13.7 billion for Innovative Medicine and $7.7 billion for MedTech.
Segments and material changes
- Innovative Medicine: 2023 sales of $54.8 billion, up 4.2%. Oncology sales rose 10.5%, led by DARZALEX and ERLEADA; immunology grew 6.6%, including STELARA growth. Infectious-disease sales fell 18.9%, largely due to lower COVID-19 vaccine revenue and PREZISTA loss of exclusivity. REMICADE, IMBRUVICA, ZYTIGA and XARELTO also faced declines.
- MedTech: Sales of $30.4 billion, up 10.8%; operational growth was 12.4%, including a 4.6% contribution from acquisitions and divestitures, primarily Abiomed. Interventional Solutions rose 47.7%, reflecting Abiomed and electrophysiology growth.
- Worldwide sales growth was 6.5%, comprising 6.8% volume growth, 0.6% price growth and a 0.9% adverse currency effect. U.S. sales increased 10.6%; international sales increased 1.9%.
- New products introduced in the prior five years represented approximately 25% of 2023 sales. R&D expense was $15.1 billion, up 6.7%.
Outlook, commentary and key risks
- The filing provides no quantified 2024 sales or earnings guidance. Management said operating cash flows, external funding capacity, committed credit facilities and commercial paper access are expected to provide sufficient resources for operating needs; it did not foresee significant incremental liquidity risk.
- Management estimates the 2024 effective tax rate will rise approximately 1.5 percentage points from 2023, primarily due to Pillar Two tax rules, subject to further legislation and business developments.
- The Kenvue separation generated a non-cash gain of $21.0 billion, recorded in discontinued operations. J&J retained a 9.5% Kenvue stake, valued at $3.9 billion at year-end, and intends to divest it; timing is uncertain. The separation also involved $986 million of costs in 2023.
- A roughly $7.0 billion talc-related charge was recorded in 2023. The company reports a total talc reserve of approximately $9 billion, payable over 25 years (nominal value approximately $12 billion); litigation remains unresolved and potential loss beyond accrued amounts cannot be estimated. Talc matters were a critical audit matter.
- The company expects to pay approximately $2.1 billion remaining under its opioid settlement agreement; litigation involving remaining government and private claimants continues.
- Key commercial risks include generic and biosimilar competition, pricing and reimbursement pressure, regulation, product safety and liability claims, manufacturing and supply disruption, foreign exchange, cybersecurity and geopolitical uncertainty. U.S. biosimilar entry for STELARA is not anticipated before January 1, 2025 under settlements and agreements; STELARA represented 12.8% of 2023 revenue.
- 2023 restructuring charges included approximately $0.5 billion for Innovative Medicine R&D program exits and $0.3 billion for MedTech Orthopaedics actions. Estimated total program costs are $0.5–$0.6 billion and $0.7–$0.8 billion, respectively.
- Auditor PwC issued unqualified opinions on the financial statements and internal control over financial reporting. No cybersecurity incident was known to have had, or be reasonably likely to have, a material impact as of the filing.
Important facts for investors to verify
- Reconcile continuing-operations performance with reported total earnings: the Kenvue separation gain materially lifted 2023 net income, while the talc charge weighed on continuing results.
- Track talc litigation, the status and adequacy of the approximately $9 billion reserve, and remaining opioid settlement payments.
- Assess STELARA’s 2025 U.S. biosimilar-entry exposure and the trajectory of other products affected by patent expiry or competition.
- Monitor MedTech growth and margins, including Abiomed integration, Orthopaedics restructuring, and supply or procurement pressures.
- Confirm the timing and proceeds of J&J’s intended sale of its retained Kenvue interest, and the effects of drug-price regulation and higher expected taxes.